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3 Summary and Conclusion New Englands natural gas supply has changed dramatically over the past 15 years Canadian supplies provide 47% of total New England gas supply Gas supply availability and high price volatility will be the norm in the near term at least through 2008 Historical sources of gas supply for New England are projected to decline or remain flat Recent reassessments of gas supply availability from the WCSB and offshore eastern Canada are troubling New supplies from the Arctic and MacKenzie Delta are several years away Demand for gas in New England and other neighboring power markets continues to grow Gas procurement strategies in other markets reverting to long-term contracting

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5 Summary and Conclusions (cont.) LNG is the most reasonable near-term option New Englands near-term gas supply requirements will have to be met by new LNG facilities Most likely to be located in Maritimes Canada or Quebec Not likely to be located in New England Gas infrastructure will have to conform to gas supply availability At least one or two LNG projects with access to New England markets will be required Without these projects, gas prices will continue to be very volatile and competition for gas supply will be exacerbated, particularly during the winter period The gas supply and operational benefits provided by the Distrigas facility is critical to New Englands markets A long-term reduction in gas supply from Distrigas without the availability of an equivalent replacement supply source will place upward pressure on gas prices, lead to supply limitations and decrease system reliability

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20 Gas Supply & Demand: Conclusions Recent concerns about short-term gas availability due to: Increasing gas well decline rates Lower productivity levels for wells in traditional supply areas Reductions in excess capacity Long-term outlook for gas supply remains positive Increases to the resource base Improvements in drilling technology Increases in non-conventional gas supply Opportunities from new supply areas Imported LNG Most forecasts expect imported LNG to be the marginal source of gas supply over the near to mid-term Just recently, Canadian gas was viewed as the incremental source of supply

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NORTHEAST NATURAL GAS INFRASTRUCTURE

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22 Northeast Pipeline Grid

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23 Typical Northeast LDC Natural Gas Load Duration Curve

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Competition for Natural Gas in Neighboring Markets

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25 Competition For Natural Gas in Neighboring Markets Availability and price of gas in New England will also be influenced by demand for gas in neighboring markets Demand for electric power in Ontario, Quebec and New York expected to increase, with gas-fired supplementing a good portion of incremental demand These neighboring gas-fired projects will compete for gas supplies and transportation capacity with New Englands power generators The newer gas procurement strategies of many of these projects reflect the long-term nature of the underlying power contracts

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27 Competition For Natural Gas in Neighboring Markets The projected gas-fired power generation needs in neighboring markets will require additional firm pipeline capacity and incremental gas supply 1.2 Bcf/Day of pipeline capacity by Bcf/Day of pipeline capacity by Bcf of gas supply per year by Bcf of gas supply per year by 2010

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FUTURE NATURAL GAS SUPPLY/DEMAND SCENARIOS

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31 Scenario 1: Competition for Gas With Other Markets Natural gas is still the fuel of choice in other markets New England generators will be competing with other generators operating under long-term power contracts Concern that demand growth in Ontario and Quebec could absorb existing pipeline capacity from western Canada and the midwest US New England generators will have to compete with projects in New York for pipeline capacity originating from the north and south It is important to develop new gas supply sources to feed the supply constrained pipelines of M&N and PNGTS Without new gas supply and infrastructure, price volatility in the region will remain high, particularly during the winter Concern over system reliability as load continues to grow and gas supply growth lags demand.

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32 Scenario 2: Reduction in Gas Supply Reduction in supply could be due to a hypothetical reduction in the availability of gas supply from the Distrigas facility Reduction in supply would have significant ramifications on New Englands gas supply picture Distrigas provides a range of product options necessary to the region LNG provides 20% of the annual gas consumed in New England, most of which is supplied by Distrigas Availability of gas from Distrigas allows for a more efficient operation of the pipeline system Unless loss of supply can be offset with supplies from the north, loss of supply from Distrigas will have reliability implications and lead to higher price volatility